Risk Behaviour and Risk Management in Business Life

Article excerpt

Risk Behaviour and Risk Management in Business Life, edited by Bo Green, 2000, Dordrecht, The Netherlands: Kluwer Academic Publishers

Reviewer: Stephen Diacon, University of Nottingham

Up until 1994, Bo Green was project manager at the Swedish National Board for Industrial and Technical Development, but in the spring of that year he joined Stockholm University to direct a multidisciplinary program of research on risk. Since then, the university has organized two international seminars on risk behavior and risk management: the first specifically on risk and banking, and the second on the broader theme of risk in business. This book is a compilation of the best papers and keynote speeches from the second of these seminars held in Stockholm in June 1997, some of which have already appeared in scholarly journals.

The foreword, by the editor, explains that the book is intended to focus on a number of broad risk-related subjects, including risk assessment and credit management, psychology in business life, risk management in small firms, and the law relating to business risks. In actual fact, the book seems to have one major and one minor theme: the operation of trade and personal credit markets, and the need for a multidisciplinary perspective on risk. The book includes 58 short articles from mainly academic contributors that discuss a range of risk-related problems mainly applied to the market for credit.

The book begins with an introductory, but rather misplaced, chapter entitled "Cross the Borders," which attempts to highlight the issues involved in exploring risk from a variety of different social science disciplines. Short commentaries are provided from professors of business, law, banking, insurance, and psychology that set out their individual views on the case for effective interdisciplinary research on risk. Although a genuine attempt has been made to provide a variety of perspectives on risk in business, the range of disciplines represented is rather narrow (being limited primarily to banking, business, and finance), and the authors have not attempted their own multidisciplinary collaboration.

The second chapter then introduces the main thrust of the book, risk assessment and credit management in credit markets, which takes up about one-quarter of the remaining pages. Papers are presented on domestic and trade credit risk in bank lending decisions and on credit management systems. Of particular interest is quantitative and qualitative research that explores differences in corporate loan repayment behavior based on a survey of more than 3,000 companies in 16 European countries.

Chapter Three provides an overview of psychological research on decision making under risk and discusses research applied to practical business decisions such as whether to take out a loan and insurance against default, and lenders' credit evaluation decisions. The chapter ends with two interesting articles on the performance of experts in making risk-related decisions, which analyze the role of expertise in making decisions in a complex environment and explain why experts often disagree. …